SEDCO Capital uniquely positioned as Saudi stock market soon opens to foreigners

The Saudi Stock Exchange or Tadawul is opening to direct foreign investment in less than a month. When the market opens June 15, investors the world over will be ready to step in with an unprecedented infusion of cash; the kingdom stands to see its economy grow and diversify.

In recent years, the Saudi economy has begun to move away from its oil-based roots; privatizing various sectors of commerce that had been the sole purview of the government of King Salman.

SEDCO Capital, with offices in Riyadh, is uniquely poised to understand just what the opening of the market will mean, both to the country and to investors. The company’s directors gave an interview to Gulf News Journal this week.

Chief Executive Officer Hasan Al Jabri says the move to open the market is the natural ‘next step’ as the nation continues to expand and grow beyond oil.

“This opening will add to the existing financing boosting the indigenous industries and support the Saudi economic diversification away from oil which remains today the main sources of revenue,” Al Jabri said. He noted the opening would increase transparency in the private sector, which currently accounts for less than half of economic activity in the kingdom.

Yazan Abdeen, lead fund manager, head of MENA liquid assets at SEDCO Capital, said that while trading will be electronic, investors will benefit by having a brick-and-mortar presence in Riyadh. “Global investors will find that local presence and language would remain an added value to their Saudi exposure particularly on the stock selection side,” Abdeen said.

He noted that in similar situations, international investors develop a close relationship with firms already established in the market.

“We expect the initial active money flow to be into increased exposure to Saudi based asset managers with investment processes that are acceptable on global standards. This is how we are positioning our business at SEDCO Capital to benefit.”

There are specific regulations and procedures that are unique to Tadawul, he noted, that are difficult for outsiders to navigate.

Bernard Caralp, chief investment officer and head of asset management, said the market “provides a fertile ground for finding stocks to outperform. To capture this alpha in an appropriate way - meaning without taking excessive risk - investors must come closer to asset managers based in the country.”

These local teams, he said, have unique intelligence into the inner workings of the industries and companies in the kingdom, and will do best by using local teams to place their capital.

Abdeen ended with a final thought on the appeal of Tadawul to investors: “Market size, liquidity and sector diversity is an outstanding feature of the market. From an investment perspective the high dividend yield of the market combined with the lack of currency risk as the SAR/US$ peg is there to stay is one of the most appealing investment propositions of the Saudi market.”